class: title-slide <br> <br> <br> .center[.large[ **The Limits of Market-Making**]] .Small[ .center[ *SIWG Presentation <br> Florence - 15 March 2023*] .center[<strong> Luuk Schmitz </strong> (European University Institute)] ] <br> <br> <br> <br> <br> .small[ .center[
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[@luukschmitz@mastodon.online](https://mastodon.online/@luukschmitz)]] --- name: contents-slide <br> .Small[ >‘One thing will **definitely not occur** […]: **a repetition of subsidizing industrial policies** which have already failed in the individual countries’ (Martin Bangemann, 1992: 19) <br> >‘In the end, the **supporters** of an [EU] **industrial policy** were effectively **beaten back**’ (Leon Brittan, 2000) <br> >‘If Europe still wants to be a manufacturing powerhouse in 2030, **we need a genuine European industrial policy**. […] it’s what will give Europe its **economic sovereignty** and **independence.**’ (BMWE & MEDF 2019) <br> >‘After the “Europe of democracy” and the “Europe of the market”, let us now pave the way for a “**Europe of power**”’ (Thierry Breton, 2022) <br> >‘You cannot fall in love with the single market’ (Jaques Delors, 1989: 5) ] --- name: part1 class: inverse, center, middle ## EU Industrial Policy: After Market Making --- ## The argument .pull-left[.Small[ **What explains the emergence of statist policies in a polity that is made up of anti-statist institutions?** - Changed global context has exposed the limits of market-making - A fear of falling behind triggers episodes of industrial policymaking - Scope of response determined by political dilemmas and institutional capacity ]] .top[ .pull-right[ <img src="data:image/png;base64,#thesis.jpg" width="95%" style="display: block; margin: auto;" /> ]] --- ## Four contributions .pull-left[ - The role of the state in the design and direction of markets in the 21st century - The centrality of global dynamics for the European project - Institutional change in Europe - The politics of EU industrial policy ] .pull-right[ <img src="data:image/png;base64,#fork.png" width="90%" style="display: block; margin: auto;" /> ] --- name: part2 class: inverse, center, middle # What are the limits of market-making? --- ## Geopolitics .pull-left[.small[ The reliance on open markets only goes as high as the lowest common denominator Two trends: 1. Increase in subsidies and trade restrictions since 2008 2. Supply-chain disruptions since the Covid-19 pandemic > ‘While our global industrial competitors get billions in subsidies, our bureaucracy is led by political leaders – Mr Almunia is a political leader – who have not understood that the world has changed. It is like Rome surrounded by the barbarians. We all await the fall of Rome. It’s not funny’. (Arnaud Montebourg, 2014) **It has led to the fusion of economic interest and national security** ]] .pull-right[ <img src="data:image/png;base64,#economist.png" width="65%" style="display: block; margin: auto;" /> ] --- ## Twin Transitions .pull-left[ Increased attention of two key market failures: 1. The lack of progress in digitalization, innovation, and cutting edge technologies 2. Structural inability of markets to unwind highly profitable but polluting lines of business **It has led to an expansion of what can be seen as market failure** ] .pull-right[ >‘Leading the twin transition in this changing world is the driving force of this Commission. This is our generational task and opportunity’ (Ursula von der Leyen, 2020) <img src="data:image/png;base64,#tech.png" width="95%" style="display: block; margin: auto;" /> ] --- ## Constraining macro-economic governance Long-term changes (energy markets, digitalization, possible reshoring/nearshoring, demographic ageing) all call for massive public investment. Until recently, macro-economic governance in the EU was not conducive for any such ambition. On the contrary, the micro-management of business activity and reallocation of resources between economic sectors (i.e. industrial policy) was pacified with disciplinary state aid & fiscal rules. <br> Nowadays, we see a **repoliticization of micro-management**, and a turn to **more conducive macro-economic governance**. --- name: part3 class: inverse, center, middle # Three dilemmas of supranational economic governance --- ## Redistribution-Efficiency .pull-left[ Achieving short-term aims versus long-term economic goals But possible without distorting the single market or not? ] .pull-right[ <img src="data:image/png;base64,#Rplot.svg" width="95%" style="display: block; margin: auto;" /> ] --- ## Competence-Control <br> <br> <br> <br> <img src="data:image/png;base64,#cc.png" width="75%" style="display: block; margin: auto;" /> --- ## Inward/outward-looking .pull-left[ Not all demands for support are created equally. Significant conflict exists between business, interest groups, and member states; specifically: - A rift between demand for inward and outward-looking measures - 'Neoliberal' versus 'neo-mercantilist' actors] .pull-right[ <img src="data:image/png;base64,#jcms13428-fig-0001-m.jpg" width="90%" style="display: block; margin: auto;" /> ] --- ## Conclusion: the growing pains of an EU industrial policy A remarkable turnaround in the direction of EU economic governance has unfolded - This is based on a changing world and a fear of falling behind Industrial policy is becoming *supranational* and *market-directing* Measures take a conspicuous shape by relying on unused treaty flexibility, due to: - Limits of administrative capacity - Politicization of a more full-fledged EU industrial policy Policies lack political legitimacy, but Eurosceptic countries hold the keys (arguably) --- class: inverse, center, middle ## Thank You!